Monday, October 14, 2013

What You Need To Know About Closing Costs

Photo from Toolsformoney.com

Many home buyers fear being rejected when applying for a mortgage because it could mean they will not be able to continue with the home buying process. Aside from the fear of rejection from the bank, there is also the fear of high closing costs. In this article we will break it down into sections so that you can have a clearer picture of these fees. These figures are just an example, for a more detailed explanation, it would be best to contact a mortgage loan officer near Fort Knox.

The following example is for the Ft Knox Kentucky area:

Average origination fees charged by lenders: $470

Average third party fees charged by lenders: $1506

Average origination plus third party fees: $1976

Let’s say you find a house for $250,000, you will apply for a $200,000 mortgage at the bank (downpayment of 20%) the estimated closing costs are $1976. Now, let’s break this down so you will have a better idea of what this means.The originating fees usually have in them the following:

Origination points (typically $0 in the Ft Knox area)

Application Fees

Document preparation

Broker, originator or lender

Processing Fee

Tax service Fees

Underwriting

Flood Certification Fee

The costs for the above will change but they are all pertinent and vital to the house-buying process.The origination points are fees or a percentage that you pay to purchase a lower rate. The application fee is what you pay the bank when you are filling out your loan. The documentation fee is what you pay the bank to handle your loan application in a timely manner. The broker / originator / lender fee (which is not customary in our area) is 1-2.5% of the total amount loaned as compensation for services provided. The underwriting fee is the amount collected from you by the bank for their underwriters. The tax service fee is a one time fee to set a service that ensures the property taxes are paid on the property. Flood Certification is a one time fee to check the property against flood maps to ensure that the property is adequately covered by insurance if it is found to be in a flood plain. Make sure you talk with the mortgage lender you are working with so you have an idea of what you are paying for.These are the third-party fees you will pay (they are still part of the total closing costs).

Appraisal

Attorney, closing or settlement

Credit report

Flood certification

Employment verification

Inspections

Postage/courier

Survey

Although much lower than the originating fees, these are still a part of the whole amount you pay. The appraisal fee is the amount you pay to the housing loan officer or the mortgage appraiser who will inspect the value of the house. They will take measurements, check out the construction of the house, and will then compare this with other recently sold homes near Fort Knox. Once they get this information, they will be able to give you an appraised value for the home. This value is how the bank decides how much they can loan. There are some good Fort Knox appraiserswho will be able to give unbiased and honest opinions of value. The credit report fee, employment verification, inspections, postage, and survey fee are all minimal.Banks have money to lend as long as customers meet a certain criteria. This is why it is always a good idea to maintain a good credit score and pay off debts before applying for a housing loan. It is also a good idea to build your savings account.